Real Estate Information Archive

Question: Allison, we own a condo a Lake Cliffe in Dillon, CO, and we are ready to put it on the market, but we’ve heard that it is next to impossible to get a loan on a condo right now.  What do we need to know?

Answer:  Good question!  We have had some big challenges with condo financing for the past several years.  The good news is that the trend seems to be loosening up a bit.  For more details, I checked with Wendy Paulus of Cherry Creek Mortgage.  Here’s her take:

“For the last several years, we have been pretty restrictive on condos, particularly those in resort areas.  Effective in 2013, our rules have been relaxed and we are in a position to offer conventional financing, including 30 year fixed, up to $417,000 loan amounts and the rates/costs are typical conventional!!!

(we hope to expand this to High Balance Conforming and Jumbo soon as well)

PRIMARY HOME BUYERS:

-          Up to 95% loan to value with and without mortgage insurance

SECOND HOME BUYERS:

-          Up to 90% loan to value with and without mortgage insurance

INVESTMENT HOME BUYERS:

-          Up to 80% loan to value

We no longer call a condominium a condotel just because there are short-term rentals in the project. 

We are still restricted from lending on a project that has more than 20% commercial in the building.

We still ask for information from the HOA including questionnaire, decs/bylaws, insurance(s)  and annual budget

Front desks for 24 hour check-in/booking are still an issue.

We are going to try to get some projects approved in advance of actually taking a loan application so if you have a condo project that you find is a strong seller in your market, let me know and we will attempt to get it approved for you.”

This is good news for Summit County where almost all of our condo complexes could have been considered condotels in the last few years.  We’re making steady progress forward! 

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com

Here is some more good news for condo owners...the FHA has revised the condo rules again to reduce some of the barriers to financing.  Restrictions still exist that hamper some investments, but we are heading in the right direction!  Click here for more details!

Keystone, Copper Mountain and Arapahoe Basin are up and running, and Breck's lifts will be turning by the end of the week!

For answers to your real estate questions, call Allison at 970-468-6800. Email - Team@SummitRealEstate.com. Allison is a long time local in Summit County. Summit Real Estate – The Simson/Nenninger Team is located at the Dillon Ridge Marketplace. Allison’s long-time residency and years of real estate experience can help you make the most of any buying or selling situation. She’s a Certified Residential Specialist (CRS), the highest designation awarded to a Realtor in the residential sales field.  Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com  

We awoke to a beautiful dusting of snow on the mountain peaks this morning....this fall has been absolutely breathtakingly beautiful.  I hope you have had a chance to get up here and enjoy it! 

Here is some good news on the condo financing front that you may be interested in: 

Real estate industry welcomes changes to FHA condo rules
Investor ownership limit upped, legal liabilities for HOA boards reduced
By Ken Harney, Friday, September 14, 2012.    

Inman News®


The Federal Housing Administration has finally done what it promised back in May: published revised rules that could convince condo associations across the country to get certified or re-certified for financing, thereby opening individual unit owners and sellers to low down payment, FHA-insured mortgages once again.

For condo boards, real estate agents and property managers, the long-awaited rule changes announced yesterday should prove to be "excellent news," that will "help spark home sales and help tens of thousands of condominium associations recover from the housing slump," according to the Community Associations Institute, the largest U.S. trade group in the field.

Among other changes, the rules eliminate some of the legal liability headaches that caused many condo boards to balk at FHA certifications; raise the permissible investor-ownership limit; and increase the percentage of non-residential, commercial use allowed in an FHA-certified project.

To Christopher Gardner, managing member of FHAProsLLC, a Los Angeles-based firm that assists condo boards with their applications for FHA certifications, the changes "aren't a home run but maybe a double," but should still significantly reduce the impediments associations encountered in seeking FHA approvals.

Under federal rules, individual units in condo projects are not eligible for financing unless the entire project has passed FHA's certification process, which looks at project budgets, reserves, forthcoming capital improvement needs, insurance policies, delinquent payments of association dues, composition of renters versus owner-occupants, and various other factors.

Industry experts welcomed the revisions to the certification form itself, which previously intimidated condo association officers because it appeared to ask them to accept broad legal liability on matters they couldn't totally be certain about, such as disputes among tenants in the building, litigation filed with courts involving the condo project or board, compliance with local and state regulations and the like.

Though FHA attempted to reassure them that it would be rare that the government would seek the maximum penalties in cases of misinformation in applications for certification, those penalties nonetheless were daunting: up to $1 million in fines and 30 years in prison.

Now the certification form asks a single signer representing the association to attest that, to the signer's knowledge and belief, the information in the application is accurate, has been reviewed by an attorney, and that the project complies with local and state regulations.

The signer also must warrant that he or she has no knowledge of circumstances that might have an adverse impact on the project, including construction defects, "operational issues," or legal problems. The federal penalties remain, but consultants such as Gardner say the revisions should alleviate "a lot of the fears" boards had with the previous language.

The rule changes published Thursday are "temporary" until FHA replaces them with formal, final regulations that would be preceded by proposed rules giving the industry additional opportunity to seek improvements. The new policies also represent the culmination of lengthy negotiations between FHA and industry groups, including NAR, CAI and consulting and management firms that started last spring.

At a conference held by the Northern Virginia Association of Realtors Thursday, acting FHA commissioner Carol J. Galante said the revisions show "that we listened" to the critiques from the industry, while still protecting the government's insurance funds.

Under the previous rules, condo associations abandoned FHA in droves, even at significant costs to their own unit owners who suddenly had difficulty selling because FHA financing was no longer available to purchasers.

Only one out of 10 condo associations that would normally qualify for FHA financing currently is certified, according to Gardner, whose firm maintains a massive database of information on condos. HUD confirms that just 2,100 out of a possible 25,000 projects had obtained certifications or recertifications as of late last year.

The human costs of the previous rules were sometime extreme, Gardner says. In one case, an elderly woman who owned a unit in a non-certified community sought to obtain an FHA reverse mortgage in order to help pay the costs of her cancer treatments. The condo board said no -- it didn't want to run the certification gauntlet or take on the legal liabilities.

Among the key changes now in effect:

    The investor ownership limit in existing projects has been raised to 50 percent. Previously there was a 10 percent cap on the number of units owned by any single investment entity. Now the rule states that "any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units…if at least 50 percent of the total units in the project" are owned or under contract for purchase by owner-occupants.
    The percentage of space used for commercial/non-residential purposes in a project is limited to 25 percent, but applicants can request exceptions up to 35 percent and even above in certain mixed-use developments that are still "primarily residential" in character and where the project is "free of adverse conditions to the occupants of the individual condominium units."
    Condo associations in which as many as 15 percent of unit owners are 60 days delinquent on their condo fees will now be eligible for certification. Under the previous rules, no more than 15 percent could be 30 days late. This was a major issue for many associations since they didn't track 30-day delinquencies. Industry groups had sought a 90 day delinquency standard.
    Previous confusion over FHA requirements on fidelity bonds for management companies -- with coverage that sometimes duplicated what was already maintained by the condo association itself -- appears to be resolved. If the association's fidelity bond policy names the management company as an insured or agent, it should pass muster.

We are cautiously optimistic that these changes will make a positive impact on the Summit County real estate market! 

Officials shed light on issues to be addressed

Question:  Allison, we want to buy a condo in Keystone, CO, but we have heard that it is difficult to get condo financing.  We need to get a loan to purchase – do you know what the current status is?

Answer:  You are correct that financing regulations for condos can be difficult,  but certainly not impossible!  The best step you can take is to work with a local lender that knows the area and the ins and outs of lending on resort property.  Aside from that, here is some information from Inman News regarding what is happening in Washington:

When acting FHA commissioner Carol Galante told a standing-room-only audience at NAR's midyear meeting last week that "we have heard you" on condominium issues -- and that FHA would publish revisions to the agency's controversial rules "very, very soon" -- she provided no details about what specific modifications the industry and consumers could expect.

Some audience members speculated: Will the changes be enough to bring back FHA financing of individual condo units to thousands of communities across the country that no longer are certified?

Will they be enough to open up financing to first-time buyers who seek to use low down payment FHA loans in places like Las Vegas, Miami, Phoenix and dozens of other markets where investors have purchased large percentages of condo projects, rendering them ineligible for FHA approvals under current rules?

Could Galante and HUD simply throw in the towel and scrap -- or suspend -- the whole package of heavily criticized requirements, given the sharp decrease in FHA condo volume this fiscal year?

First, there's zero chance the whole package of rules will be put on ice or withdrawn. The rules were adopted following FHA studies of key factors associated with high default and claims rates in condos, plus a general perceived need to keep in much closer touch with the financial health of condo projects -- their budgets, reserves, insurance coverage and compliance with state and local regulations that could affect their viability.

However, there's an excellent chance that some of the specific requirements that have bugged associations and unit sellers will be modified in a two-step process scheduled to begin shortly. FHA plans to issue a mortgagee letter to lenders in the near future that revises a number of the current rules.

But it's also working on drafting a full-blown regulatory proposal that will allow the industry and public to weigh in on the pros and cons of the proposed rules -- an opportunity that was conspicuously absent when the current rules were promulgated.

Once those comments are digested, the agency will publish final regulations designed to govern the condo financing program for the long term. Timeline on that: Probably sometime in 2013. During the interim, the rule changes outlined in the soon-to-arrive mortgagee letter will be in effect.

So where's the meat here? What areas of the current rules are most likely to be changed?

High on the list: The agency intends to soften and clarify some of the "project certification" language in the current package that condo associations and builders must sign. In its current form, the certification has terrified many condo board officers -- typically volunteers from the resident base -- that they are assuming overly broad, lifelong legal responsibilities to inform FHA every time there is a material change in any of the information submitted, including enactment of state or local regulations that might affect the project. Under earlier rules, condo association attorneys could take on legal liability for the accuracy of the submission.

The current language also requires condo board members to attest that they have "no knowledge of circumstances or conditions that might have an adverse effect on the project or cause a mortgage secured by a unit" to become delinquent, including "disputes concerning unit owners" and "dissatisfaction among unit owners about the operation of the project or the owners association." Any board member who "knowingly and willfully" submits information found to be false to FHA as part of the certification is subject to fines up to $1 million and 30 years in prison.  

Andrew Fortin, former government affairs head for the 30,000-member Community Associations Institute (CAI) and now vice president of the national management firm, Associa, asks, "Would YOU sign something like this?" Homeowner association leaders in droves have declined to, and their projects are among the thousands no longer certified by FHA for unit financings.

Other changes coming:

• Condo fees in arrears. Under the current rules, no more than 15 percent of the total units in a project can be more than 30 days past due on the condo fee payments. Look for an extension of the delinquency standard beyond 30 days -- maybe double or triple that timeline -- or an increase in the percentage threshold beyond 15 percent.
• Investor ownership limits. The rules now prohibit more than 10 percent of the units in a project from being owned by a single investor. This has created significant problems when a developer sells out most of a project but retains an unsold portion in its own name for a period of time, for sale or rental. Look for a relaxation of the rules here.
• Concentration of FHA loans. Currently no more than 50 percent of the units in a project can carry FHA financing -- a limit that creates problems for some projects aimed at lower and moderate income buyers, who are often first-timers and minorities. FHA is looking hard at raising that ceiling.  
• Non-residential, commercial space. The agency now limits a project's commercial usage to 25 percent of total floor space. This is tough on some condos in urban areas where retail or office space rents help pay the bills, but the requirement is likely to be changed to accommodate those projects' needs.

One  controversial area that may not see much in the way of modification: Non-owner occupancy. The current rule limits rentals to 50 percent of all units. FHA believes this standard is consistent with Fannie Mae and Freddie Mac rules, though there could be some wiggle room if second home/vacation home units are counted on the owner-occupied side of the ledger.

For answers to your real estate questions, call Allison at 970-468-6800. Email - Info@SummitRealEstate.com. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com  

If you own a condo, or would like to own a condo in Summit County, CO, you might find the following interesting!  

Condo Financing Issue Finally Making Waves In Washington
For years, the Colorado resort areas have clambered to the National Association of Realtors (NAR) that condo financing rules were killing the local markets, and that the FHA, Fannie Mae and Freddie Mac rules needed to be addressed. It was clear for the first time this year in Washington recently that the condo financing issue is beginning to stick.  Congressman Polis talked about his bill to address workforce housing condo rules, NAR had talking points on FHA condo rules that need to be addressed from a regulatory perspective and there is a letter being circulated by Members of Congress telling the FHA to take action. As of this morning, NAR reached out to the resort areas and offered to request a waiver or exemption for resort areas.  The Glenwood, Steamboat, Summit and Vail Boards will be working with NAR to draft and request the waiver for resort areas.   Due to the Washington political climate, it is possible that no changes will be made this year, but it is inevitable that the issue will be addressed in GSE and housing reform next year.

Let's hope that the Washington politicians can see that the fact that many lenders right now can not lend on condos with any short term rentals in them (which is just about EVERY complex in Summit County!) is really hurting our local market!

 

What do you mean I'm approved, but the condo isn't???

I'm sure you've heard that financing is next to impossible here in the mountains -NOT TRUE!  It is possible, and we do have some addtional hurdles to jump!  For some good info on the situation and what lenders are looking for in condo lending click here

Whether you enjoyed the day off in honor of Martin Luther King Jr. day or were hard at work, take just a moment to think about your dreams.  "I have a dream" is a phrase that most people can identify in an instant due to the impact Martin Luther King Jr. had on our entire civilization.
 
I'd be happy to have an impact on those people that are near and dear to me.  Having dreams, setting goals, and living with intention are the things I try do to make a difference in my life and theirs.
 
In honor of the late, great Dr. Martin Luther King, here are a few excerpts from his "I Dream" speech delivered August 29, 1963.   He was assassinated on April 4, 1968 and will always be revered as the leader of the American Civil Rights movement.
 
“...I have a dream that one day this nation will rise up and live out the true meaning of its creed: "We hold these truths to be self-evident, that all men are created equal."
I have a dream that one day on the red hills of Georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood.

I have a dream that one day even the state of Mississippi, a state sweltering with the heat of injustice, sweltering with the heat of oppression, will be transformed into an oasis of freedom and justice.

I have a dream that my four little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character.

I have a dream today!

I have a dream that one day, down in Alabama, with its vicious racists, with its governor having his lips dripping with the words of "interposition" and "nullification" -- one day right there in Alabama little black boys and black girls will be able to join hands with little white boys and white girls as sisters and brothers.

I have a dream today!...”
 
If you'd like to view his entire speech, I've attached a youtube clip:
 
I have a Dream!

And Here's Your Morning Coffee!